Let's End the Buyer-Supplier Negotiation Countertactics Spiral
Every interaction a company has with its suppliers can set off an endless series of tactics and countertactics. It's like a wrestling match. Both sides invest so much time and effort in trying to anticipate the next steps by the other that the focus is turned away from the best interests of their organizations. This comes especially true during the negotiation phase of the procurement process.
Negotiations between buyers and suppliers have traditionally assumed a zero-sum outcome: Each party does not benefit except at the expense of the other. The end result of this tactic/countertactics spiral is a combination of inefficient decision-making, obscured visibility, and contentious working relationships.
Since the formality of the procurement process has risen at most organizations over the past decade, it is understandable that suppliers are frustrated. In fact, as much as formal procurement has provided benefits, there also have been some unintended consequences.
With a formal procurement process comes the expectation that suppliers will stop contacting their former internal contacts during negotiations, as well as the idea that a focused and quantitative evaluation of supplier proposals will lead to better and more objective decision-making than listening to value propositions. Since both of these procurement changes –- or tactics -- interfere with the traditional sales process, it is only natural that suppliers would employ countertactics in response.
Earlier this year, The Sales Readiness Group published an article, Sales Negotiations: 5 Tactics to Use with Procurement, and its observations about the procurement process are well founded in the reality of commercial interaction. Author Ray Makela states, “As a sales professional, you must be prepared to counter these [procurement] tactics, primarily by planning, leveraging your relationships, and reinforcing the shared interests and value proposition you have worked so hard to develop for your customer.” As a procurement professional, even I agree with that statement. My only difference in position is that Makela’s proposed tactics are not tactics as much as they are countertactics designed to improve the supplier’s position in a negotiation.
And my immediate reaction to the post was to craft counter-countertactics so that the procurement process could stay intact and achieve its objectives. But that will inevitably lead to a never-ending spiral of tactics and counters -- neither of which will lead to better results, just an increasingly complex battle for power and influence.
I propose an end to tactics altogether, at least in the case where tactics are deliberate rules and methods designed to gamify the procurement process. When I go back to the beginning and look at the procurement tactics outlined in Makela’s article, I’m not particularly enthusiastic about any of them, regardless of how often they are used by procurement. Although these tactics keep suppliers on their toes and potentially tip the scales of influence in procurement’s favor in the short term, they also place a disproportionate emphasis on price over value. Continuing in that mode of operation diminishes procurement in the long run far more than it keeps suppliers in check.
Here is how I would break down the tactics/countertactics process, by focusing on total value creation and better collaboration with supply partners.
Tactic: Procurement dismantles the supplier value proposition by attempting to commoditize all solutions.
Countertactic: Sales entrenches itself with business owners to attempt to subvert the procurement process altogether.
Revision: Procurement allows the supplier value proposition to stay intact while making well-informed, detailed inquiries about projected costs and service levels. Suppliers demonstrate a willingness to express their value proposition in terms that capture both differentiation and cost effectiveness for their customers.
Tactic: Procurement uses suppliers’ past performance as a point of leverage during negotiation.
Countertactic: Sales insists upon a focus on the future rather than the past.
Revision: Performance is managed on a proactive basis by both parties during the entire term of the contract, not just when it is up for renewal. Rather than missed expectations being handled punitively, problems are solved collaboratively, with more energy being invested in finding an acceptable solution than in securing apologies or increasing relative influence.
Tactic: Procurement works to exert influence over suppliers to secure the upper hand in a negotiation.
Countertactic: Suppliers push back on anything that smacks of artificial delays or complications in the decision-making process, potentially even pulling out of bids to avoid further (unprofitable) investment of time and effort.
Revision: Procurement runs transparent bid and negotiation processes, offering up as much information as possible without compromising competitive advantage. Suppliers learn to trust procurement and recognize that if there is a change or a delay in the process that they will be kept informed and that procurement is not being manipulative.
Part of what creates such complications in the tactics/countertactics process is that actions are not taken at face value. Each side views the other with an air of suspicion, and demands to be the absolute victor in the game. When perception and reality are brought into better alignment through increased visibility and open communication, energy can be invested in innovation and improvement rather than anticipation and maneuvers.